Events

Mr. Wilbur X. Chen
Ph.D. Candidate in Business Administration, Accounting & Management
Harvard Business School

I use analysts’ digital questions in quarterly earnings conference calls to study how they evaluate digital investments made by non-IT firms and to examine the relationship between their views and future investment in advanced digital technologies – artificial intelligence (AI). Consistent with analysts functioning as effective information analyzers, determinant analyses show that analysts’ interest in digitization is based on factors that drive greater digitization, namely, (1) whether the firm is more likely to be suited to AI technologies and (2) whether the firm has executives or board members with experience in digital technologies. Analysts also appear to play a monitoring role when firms invest in AI at abnormally high-levels, as analysts ask more negative and competition-related questions in these situations. On the relationship between analysts’ interest in digitization and future AI investment, I find that digital questions are positively associated with AI investment (as measured by job postings with AI skills) in the following year. Further cross-sectional analyses suggest that analysts are actively encouraging firms to invest more in AI as the positive relationship is stronger when there is no managerial or industry-wide analyst disclosure on digital topics, or when the firm is not currently investing in AL Moreover, the positive relationship is also stronger when firms are currently investing in AI at abnormally low-levels. Thus, the overall findings suggest that analysts play a positive governance role in shaping non-IT firms’ investment in AI.